published Friday, March 15th, 2013

McKee acquires Drake's from Hostess

McKee Bakery has purchased the Drake's line of snacks sold mostly in the Northeast.
McKee Bakery has purchased the Drake's line of snacks sold mostly in the Northeast.

The website dedicated to Drake's cake products is a morbid inventory: Ring Dings, all sold out. Devil Dogs, sold out. CoffeeCakes, sold out. Yodels, sold out. Funny Bones, sold out.

"What is left?" the homepage at drakescakesonline.com asks. "We have nothing."

But the website -- and the snack food maker -- soon could see new life. McKee Foods Corp. agreed to pay $27.5 million to buy Drake's cakes from Hostess on Thursday, according to a filing in bankruptcy court.

Hostess named McKee's bid as the only qualified bid and canceled an auction scheduled for this morning to sell the brand.

If the transaction is approved in court April 9, it will be one of the largest acquisitions McKee has made, company spokesman Mike Gloekler said.

"In general, it's going to ripple across the whole corporation," he said.

McKee plans to put the snack cakes, which primarily are sold in New York and New Jersey, back on store shelves. But Gloekler said the company hasn't decided when or where production will start.

"But wherever we make it, some work from that plant will probably have to move to another plant," he said. "So that's the ripple effect."

The Collegedale-based company already has upped hiring to fill the hole Hostess created when it declared bankruptcy in November, Gloekler said, and the additional product line could push McKee to add to its 5,000-person workforce.

McKee's annual sales are about $1.2 billion. Hostess' annual sales were estimated at $2.8 billion, but Gloekler said Hostess hasn't released sales figures for Drake's cakes -- one of its smaller divisions.

Hostess spokesman Tom Becker declined to comment on the deal.

Being the only qualified bidder to make an offer on the brand left McKee "standing alone," Gloekler said. But he thinks the company got a good deal.

"We wouldn't have pursued it if it wasn't a great value for the price we got it at," he said.

Since McKee produces the Little Debbie brand, the company already has the facilities, employees and distribution channels to start baking Drake's products, Gloekler said.

McKee President and CEO Mike McKee said in a release that the company is aiming to reach customers who already enjoy Drake's products.

"We know that Drake's cakes are unique baked goods that have a loyal following," he said. "We have generations of experience in baking, and we will strive to bake the Drake's cakes, not just for taste and quality, but also to deliver on the memories of loyal Drake's fans."

Gloekler added that McKee doesn't plan to mess with the snacks' recipes.

"We plan to keep them true to the way they were, by using the formula that's part of the intellectual property that's part of the sale," he said.

After declaring bankruptcy, Hostess has been selling piece after piece of its empire slowly and steadily. Business affiliates Apollo Global Management and Metropoulos & Co. agreed to pay $410 million for the Hostess and Dolly Madison brands, which include Twinkies, Ho Ho's and Ding Dongs.

Most of the company's bread business was sold to Flower Foods Inc., for $360 million, which included Wonder Bread and 20 bakeries. Those transactions will go before the court for final approval on Tuesday.

The company also will auction its Sweetheart, Eddy's, Standish Farms and Grandma Emilie's breads on March 15, according to The Associated Press. United States Bakery was chosen as the lead bidder for those brands at $30 million.

about Shelly Bradbury...

Shelly Bradbury covers police and crime in Chattanooga and Hamilton County for the Times Free Press. She's been with the paper since 2012, working first as an intern and then as a business reporter. She is from Houghton, New York, and graduated from Huntington University in Huntington, Indiana, with a bachelor’s degree in journalism and minor in management. Before moving to Tennessee, Shelly previously interned with The Goshen News, The Sandusky Register and The Mint ...

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